United States: Enforcement Trends: Sanctions And International Risk (podcast)

Click here to listen to the podcast.

Transcript

I'm Alex Rene, partner in Ropes & Gray's Government Enforcement group in Washington, D.C. Today I'm joined by Government Enforcement counsel Mike Casey. Today's podcast is part of a series of Capital Insights podcasts we're hosting to examine the issues and potential regulatory and enforcement changes emanating from Washington D.C. as we transition to a new political administration.

In this podcast we're going to discuss the sanctions environment. Our conversation will be informed by publicly available statements, past behavior and general trends we've observed in the international risk and sanctions space.

With any administration change there is some level of uncertainty and no way to perfectly predict the future. Today we will make our best predictions with currently available information. We'll begin this podcast by discussing economic sanctions.

The U.S. and EU lifted a number of sanctions against Iran as part of its obligations under the Joint Comprehensive Plan of Action, also known as the JCPOA. Mike, how do you expect the situation with Iran will look under a Trump Administration?

Mike: During the campaign, Mr. Trump was very critical of both President Obama's approach towards Iran and also the JCPOA. Once Mr. Trump becomes president in January he will have the authority to unilaterally end the United States' participation in the JCPOA because the JCPOA is a framework agreement and not a treaty. While Mr. Trump will have the power to do so, I think it's unlikely that he will choose to go down that route. The United States has negotiated the JCPOA with five other countries, all of which seem to want the JCPOA to continue. In order to end the U.S.'s involvement in the JCPOA, Mr. Trump would need to burn a lot of diplomatic capital and upset some key U.S. allies, which I don't think he's going to be willing to do.

In my mind, a more likely outcome would be for Mr. Trump to undo certain aspects of the sanctions relief that the U.S. provided to Iran as part of the JCPOA. So, for example, the Trump Administration could revoke General License H, which is a general license issued by OFAC that allows foreign entities owned or controlled by U.S. businesses to engage in certain types of business with Iran. This act would have symbolic value and it also could have some very significant, real-world consequences for foreign subsidiaries of U.S. companies and foreign portfolio companies owned by U.S. private equity sponsors. Because many of these types of foreign entities have spent significant time and money during the course of the last year developing relationships in Iran, have established policies and procedures so that their dealings with Iran comply with General License H, and some of them have even made capital investments in Iran.

Alex: But Mike, Trump could also accuse Iran of violating its obligations under the deal. In August of 2015 the President Elect promised to "police that contract so tough that they don't have a chance."

Violations by Iran of its obligation under the JCPOA could result in the so-called "snap-back" of U.S. sanctions that were in place prior to January 2015. Isn't that correct?

Mike: That is correct. The conventional wisdom is that the Obama Administration has not taken a particularly hard line in monitoring Iran's conduct during the last year or so. So, for example, when IAEA monitors discovered that Iran held more heavy water than it was supposed to under the terms of the JCPOA, the Obama Administration agreed to buy some of it so that Iran's stockpile fell below the amount specified in the JCPOA.

Similarly, the Obama Administration took the position that Iran did not violate its obligations under the JCPOA when it engaged in ballistic missile testing. If President Trump's actions end up being consistent with candidate Trump's statements, I think we can expect the United States to be less generous in assessing Iran's compliance with the JCPOA in the future, which could result in the "snap-back" of various U.S. sanctions.

Alex: Let's turn to Russia. After Russia invaded the Ukraine in March of 2014, the U.S. and the EU imposed new sanctions on certain individuals in Putin's inner circle as well as sectoral sanctions on Russian financial institutions, defense companies, and oil and gas companies. What do you think will happen with these sanctions and do you think these policies regarding Russia will change under the Trump Administration.

Mike: I believe the United States will terminate its sectoral sanctions targeting Russia for at least a couple of different reasons. First, the European Union has maintained its own sectoral sanctions targeting Russia, and those sanctions are scheduled to expire in January. In order for those sectoral sanctions to continue after January, all 28 member states of the EU would need to vote in favor of renewing them, which seems unlikely at this point. Over the course of the last two years, the U.S. and EU have moved in lockstep with respect to Russian sanctions. If the EU ends their sectoral sanctions program, then I think it's more likely the United States will as well.

In addition, Mr. Trump has expressed a desire to "reset" relations between the United States and Russia. During the campaign, he made several flattering statements about Mr. Putin and Mr. Putin seems to have admiration for Mr. Trump as well. If Mr. Trump were to lift the sectoral sanctions, that would be a clear signal from the Trump Administration to Russia that the United States is going to take a different approach towards Russia on a going-forward basis.

Alex: Let's talk a little bit about Cuba. The Obama Administration has reversed a policy that was in place for the last fifty years and has taken steps to relax the Cuban embargo. What might we see from the Trump Administration with regards to Cuba?

Mike: During the presidential campaign, Mr. Trump made a series of statements regarding Cuba. In one of those statements, he pledged to "reverse" President Obama's executive orders that relaxed U.S. sanctions targeting Cuba. If Mr. Trump were to follow through with this promise once he becomes President, the change in policy would create difficulties for U.S. citizens, many of whom have taken advantage of the change in policy to travel to Cuba. And it would also create some problems for U.S. companies—in particular companies operating in the aviation and hospitality sectors—that have already started doing business in Cuba.

Again, it is hard to know exactly how this is going to play out because we're not sure how strictly Mr. Trump plans to follow through with his promises with respect to Cuba once he takes over in January.

Alex: That's true. We do not know how he's going to follow through but a hallmark of Trump's presidential campaign was his criticism of foreign governments and foreign companies' involvement in the U.S. economy. Now that he has been elected, do you foresee him trying to address those issues from a regulatory perspective?

Mike: It's a good question. As a general matter the U.S. government has increasingly scrutinized foreign investment in the United States during the last decade, most notably through the CFIUS review process. CFIUS is an inter-agency government committee that has the authority to review any transactions that could result in a foreign person obtaining control of a U.S. business. Most people expect that CFIUS will become even more aggressive in reviewing so-called "covered transactions" in the future for a couple different reasons. First, during the last few months, some members of Congress have sought to increase the scope of CFIUS' power. They feel that CFIUS currently doesn't have the authority it needs to review all transactions involving foreign investment that could have potentially damaging implications on U.S. national security.

In addition, as you alluded to Alex, Mr. Trump frequently criticized foreign investment and the effect of foreign investment on the U.S. economy during the presidential campaign. One way in which his administration could make it harder for foreign parties to invest in the United States would be to either increase the power of CFIUS or mandate more aggressive reviews of covered transactions.

As I mentioned, CFIUS has gotten most of the attention in this area but they are not the only government agency involved in either monitoring or requiring disclosure of foreign investment in the United States. For example, both DSS within the Department of Defense and BEA within the Department of Commerce could too adopt a more aggressive approach to reviewing and requiring disclosure of foreign investment in the United States.

Alex: Thank you, Mike, for you insights. And thank you all for listening.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions